Recent data show falling unemployment and rising wages, but experts warn that these figures obscure worrying prospects for the British economy.

Unemployment in the UK fell to its lowest level since 1974 to 3.7 per cent in the three months to April, while workers saw an average jump in ordinary wages of 4.2 per cent and a 7 per cent rise on bonuses, according to bonuses. Office of National Statistics. said.

However, the general decline in unemployment and rising wages does not reflect a more important economic reality – fewer people working than before the pandemic, and costs are rising faster than wages.

ONS data show that unemployment in the UK is at its lowest level since 1974 at just 3.7%

Thomas Pew, an economist at RSM UK, said: “At face value, the decline in the number of unemployed by 118,000, which caused another drop in unemployment, suggests that the labor market continued to recover in March.

“However, employment has grown by only 83,000 people. The remaining decline in unemployment was caused by an increase in the number of inactive by 65,000 people.

“Thus, while the unemployment rate has now fallen below the pre-pandemic level, the number of employed is still almost 450,000 less.”

Given the rapid rise in inflation, wage growth, including bonuses, rose by only 1.4 per cent, while ordinary wages actually fell by 1.2 per cent over the period.

Although wages are rising “by a decent amount,” said AJ Bell financial analyst Danny Husson, “they don’t match inflation, and once it stops, people’s wages are falling sharply.”

She added that wage growth came from new employees, with a record number of people moving to work in the last quarter, “indicating that workers are chasing higher pay in an increasingly tough labor market.”

Hussein said: “For the first time since the recording of more vacancies than people without work, a situation that forces employers to use any methods they can to entice workers to jump off a ship.”

“People are driving the engine, without them businesses can’t work properly, but businesses are also struggling with rising costs and looking at where these vacancies still appear, these are big companies, the ones that have deeper pockets.” which are still hired and the smallest employers are cutting ”.

Regular wages fell in three months adjusted for inflation

Regular wages fell in three months adjusted for inflation

Payments in the private sector are rising and in the public sector are declining

Payments in the private sector are rising and in the public sector are declining

Inactivity figures are also indicative: far more young people are out of work than before the pandemic, and even more are in the 54-64 age category who have not yet returned to work.

ONS data also show a staggering increase in the number of people for whom prolonged illness prevents them from returning to work.

Myron Jobson of Interactive Investor said: “Seekers keep all the cards as employers are desperate to attract and retain talent to take their business to the next level during a difficult hiring period.

‘[But] strong unemployment data protect the growing problem of people who do not work and are not looking for work.

“Since the beginning of the pandemic, about half a million more people have completely disconnected from the labor market, which is a worrying trend that needs to be addressed.

“The challenge for the younger generations who fall under the slogan ‘economically inactive’ is to provide jobs with significant career growth, not bills-paying jobs.”

Bank of England Governor Andrew Bailey, who on Monday said the bank was “powerless” in the face of sharp inflation, angered some by urging workers not to ask for higher wages.

Long-term illness is now a very serious cause of economic inaction

Long-term illness is now a very serious cause of economic inaction

Since the beginning of the pandemic, there has been a sharp increase in economic inactivity among both young and old people of working age.  The number of economically inactive people aged 16-24 jumped from about 105,000 to about 117,000 in the three months to April - in February-April 2020, the figure was less than 39,000

Since the beginning of the pandemic, there has been a sharp increase in economic inactivity among both young and old people of working age. The number of economically inactive people aged 16-24 jumped from about 105,000 to about 117,000 in the three months to April – in February-April 2020, the figure was less than 39,000

However, the sharp jump in wage growth – even if it is below inflation on an adjusted basis – raises concerns about the costs facing the economy.

Kevin Brown, a savings specialist at Scottish Friendly, added: “Raising wages really poses a real risk to the economy and then to consumers.

“The Bank of England fears that a highly competitive labor market and demands from employees to increase wages to keep pace with rising cost of living could lead to a sharp and sustained spiral of wages and prices.

“It could hold inflation down to double figures longer than the Bank of England’s target of 2 per cent, and ultimately it will depend on how employers manage the situation next year.

“If businesses do raise wages and push prices to recoup higher costs, higher inflation is more likely.”

Thus, the continuing tensions in the UK labor market and the prospects for wage growth are likely to be key indicators for the Bank of England in making difficult decisions next year.

Modupe Adegbamba, G7 economist at Axa Investment Managers, said: “The UK job market remains tense; figures show that this is starting to decline as employment and vacancies growth slows.

“There are still some opportunities to ease in the coming quarters as some of those who left the workforce during the pandemic are starting to return again. We expect the Monetary Policy Committee to raise rates in June, and anticipate another increase to 1 , 5 percent thereafter in August.

“We consider the labor market key for the Bank of England and suspect that slow growth and a weaker labor market will lead to their halt. A labor market that remains tense could trigger the growth of the Bank of England. ”

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